What Happened to the American Middle Class and Can We Restore It?

BIANNA GOLODRYGA: Now, owning a home, having a stable job, and a well-funded retirement plan. All of these are key attributes of America’s middle-class. But many young Americans fear attaining middle-class status is increasingly out of reach. That’s according to Mechele Dickerson, author of “The Middle-class New Deal: Restoring Upward Mobility, and The American Dream.” She tells Walter Isaacson how the middle-class was first established and why it’s struggling to stay afloat today.

WALTER ISAACSON: Thank you, Bianna. And Mechele Dickerson, welcome to the show.

A. MECHELE DICKERSON: I’m glad to be here. Thanks for having me.

ISAACSON: Your book is “The Middle Class New Deal.” It’s filled with prescriptions of how we can restore a secure middle class in the United States. But let’s start with how did we get a middle class in the first place? It’s not part of American History. It seems like it was created right after World War II by intentional policies.

DICKERSON: Right. And I would say it’s part of recent American history. Everyone wants to pretend that we’ve always had a middle class. We haven’t. Political leaders decided after the depression and World War II that we needed to have a stable middle class. We needed to make sure that the large sort of swath of people in this country could be stable. And they did that by creating the middle class.

ISAACSON: And they did it through things like housing, you know, which is what we’re not doing now. Right? And tell me all the things they did.

DICKERSON: Yeah. They decided that we don’t wanna keep the pre-depression model where people have to come up with 50% for a down payment, where they have to take out a mortgage loan that’s three to five years. Which meant that at the end of five years, people didn’t own the home. They then had to take out another loan in order to actually be a homeowner because the loans at that time didn’t amortize. So at the end of the five years, they still owed money on their homes. So although we think that the 15 to 30 year mortgage loans that we have now are the norm, and we’ve always had that, we didn’t. Political leaders decided that they needed to give banks encouragement to be able to convince banks, let people take out a long-term loan, repay it over time to be able to buy homes. So when we have the FHA program, which everyone thinks, oh, well that’s the way that we’ve always allowed people to buy homes. No, we have that because the government created it. Second –

ISAACSON: You say it came out of the depression. But of course in your book you also described it came out of World War II. Veterans coming back. So you have Veterans Association loans and other things. What did the veteran type benefits do to create a middle class? And was that done just intentionally to create a middle class or just out of obligation to people coming back from World War II?

DICKERSON: I would hope it was obligation. I would suspect, I mean, I wasn’t there. I would suspect it was also a bit of PR that you need to do something so that the servicemen – and although there were some service women, it was mostly men – coming back from war can get a new start. And so they did that through the GI bill and the, and the VA loans. So by allowing, returning a servicemen to be able to buy homes cheaply using VA loans, to be able to take the money with the GI bill to be able to either go get a bachelor’s degree or even get training through a trade school or a community college type degree, we told our returning servicemen, come back, go to school, buy a home, build some household wealth, and you’ll be stable and secure.

ISAACSON: Well let me read you a sentence in the book. You say, “Because of my parents’ grit, hard work and determination to become and remain middle class, I am financially secure.” But the next sentence says, “I’m not sure what the future holds for my sons though.” You got two sons. Yes. Tell me why you’re not sure this will continue.

DICKERSON: One of the things that we are seeing in this country, I see it a lot because I teach both law students and I also spend a lot of time with undergraduates, mostly student athletes at the University of Texas, is the fear and the despair coming from our young adults. My sons are 22 and 25, so they are in that age band. And I would say really all young adults under the age of 40. They’re saying we did everything right. We graduated from high school and then we realized we have to go to college because the types of jobs that our parents or our grandparents were able to get when they graduated from high school, those jobs aren’t there anymore. So they work hard and they go to college. Many of them have had to drown themselves in student loan debt to get the degree. But even those whose parents may have been able to help them go to college and they didn’t have to take out a lot of debt, are now coming out in a market where the unemployment rates for the graduates of the class of 2025 are, we don’t see those outside of a recession. So I worry about the future that we are leaving for our young adults. And we see that a lot in their despair and in their anger.

ISAACSON: Let’s define the middle class. You do it in the book somewhat by income saying this is the amount of money that a college will give you free tuition. Or – and that’s sort of a cutoff, a parameter to the middle class. Right. But what’s interesting in the book is you also use markers, the ability to own a home, the ability to get a good education. Explain the markers to me of what is a middle class person.

DICKERSON: When we think about what the markers are and when people are interviewed or surveyed about what does it mean to be middle class, they point to the ability to help their kids go to college. They point to the ability to own a home. I would say now it’s also just the ability to find affordable housing. A marker is you can find a good, full-time, 40 hours a week job that has benefits and you are called an employee and not a contractor. It’s the ability to have savings so that if you blow out a tire, you don’t have to take out a payday loan in order to be able to replace the tire so you can go to work. It’s the ability to have retirement savings so you’re not 55 or 60 years old and thinking, I may have to work until I die because I don’t have a pension in the way that my parents have a pension. Every month my parents get a social security and a pension. They have four stable sources of income. And then the final marker is sort of the flip of you wanna have savings, you don’t always want to be in debt. And it is increasingly hard for young adults to be able to attain the markers of the middle class.

ISAACSON: Well, let’s start with the first of the markers you talk about, which is housing. Now when I turned 30, that was the average age of people getting a home. You say that too in the book. Now at 40, most people don’t yet have a stable home. How do we fix that?

DICKERSON: I’ll mention a senate bill, a recent senate bill that passed through the Senate. I haven’t read it in detail because who knows whether or not they’re gonna be able to reconcile the Senate bill with the House bill. But the thing that I love about that bill is – well, the main thing is – they have acknowledged that housing is unaffordable. The second thing is they’re thinking outside the box. So for example, for the first time, at least since I’ve been paying attention, this is quite a few years now, they’re actually saying things like manufactured housing. Now do I think that is the solution to the home ownership crisis or the affordability crisis? Not necessarily, but it may be the solution for some people. So the main thing I’m arguing in the book, and when I talk about sort of the middle class new deal is, look at your community, look at your zoning laws. Is there something about your zoning laws that makes it either harder for developers to construct affordable housing? Or does it allow people who are existing homeowners to fence out the middle class and make sure they can never live there? So I would like people to think broadly and also to focus on your local communities to see what could you do there?

ISAACSON: The second market you talked about was just a good, secure job. Not necessarily the highest paying job in the world, but one that you can count on and might actually give you benefits like healthcare and pension. What’s gone wrong with that and how do we fix that part?

DICKERSON: Two things went wrong. The first was – and everyone talked about, oh, it’s global outsourcing. They’re sending our jobs overseas. And that was true. That’s what happened sort of seventies, early eighties. But then an interesting thing was happening domestically that no one was paying attention to. And I call it domestic outsourcing. It’s when companies took whole units. So they would take the accounting or they would take the landscape, the folks that they used to employ to take care of the property if it was a big business, and they basically said, we’re firing all of you. And then they go out and they effectively rehire the same people but through a contracting agency. So these folks would show up, do the same work they always did, but they would be private contractors or they would be temporary employers employed by the contracting servicer. So if the business decided they didn’t wanna use that company anymore, you lost your job even though you did absolutely nothing wrong. 

ISAACSON: Well, wait, how do we stop, how would one stop that? That seems just part of the market economy.

DICKERSON: It is part of the market economy. But as I always – the expression that I always use is we can tell who we value based on who we tax. So you can certainly make some changes based on who gets certain tax benefits. And the one I’ll point to now that we haven’t mentioned is sort of what we’re seeing now with AI, right? So when we have communities or states that are giving certain companies benefits and those companies are either coming in and eliminating jobs completely or they’re eliminating those jobs because of AI, if a state is subsidizing that, stop the subsidies.

ISAACSON: If I were to design a school system, you know, K through 12 school system that would just be a gut punch to trying to create a middle class, I would say, okay, let’s have the school start after people are supposed to go to work. Let’s put their kids on the street at three in the afternoon and let’s give them the entire summer off so that a working class family is hitting it from all sides. And a wealthy family can have enrichment programs in the summer, but the middle class just has the kids in the summer. Tell me how we should be fixing education in this country.

DICKERSON: You have described the absolute disaster, which is exactly what we are doing now. We’re still pretending as if we’re an agrarian economy where you need to have the kids off during the whole summer ’cause they gotta work the crops and you know, they go there from sundown because you need to have ’em before sunset to help you on the farm and it’s ridiculous. 

One of the things that I argue is during COVID we saw that we can be very innovative as a country. We can think outside of the box. We can think of all sorts of ways to use school buildings. We use them for testing centers, we use them for vaccine distribution. We should look at our schools and say, how can we use those buildings to make life better for middle-income and poor children? Simple things like, can we use the buildings in ways to help them catch up from the summer slide? The educational losses that all children have. As you mentioned, rich kids, we really don’t have to worry so much about their slide because their parents are gonna put them in summer camps, robotic camps, tutoring, SAT prep courses. Middle-income and poor children generally don’t do that. 

Well, public school buildings, they’re always going to have the ability to have electric electricity and to have water. So why have such a truncated school day if we can use the buildings that are already there to better help our lower and middle-income children have a shot at a middle-class lifestyle?

ISAACSON: Was the college for all mindset a bad idea?

DICKERSON: The college for all mindset I think was a bad idea only because it was foisted upon us and it was foisted upon us by businesses that decided to use the college degree, a bachelor’s degree as the cutoff for will we even interview this person. So the college for all, when high schools basically started telling – or states started telling their high schools, you’ve gotta make sure that every single kid that graduates is ready to go to college. There are some kids that either don’t want to go to college or aren’t necessarily suited for a four year program. 

We’ve ignored the benefits that community colleges have done, community colleges – and I’m a huge fan of community colleges, although I teach at a four year – because community colleges can pivot quickly. If a new manufacturing company is coming into your area and they need a trained workforce, a community college can create a six, nine month certificate that can take people that are there, train them, give a certificate so that they can work. I obviously am a huge fan of four year colleges. I have taught at two, my children went to them. But I think the college for all mantra was used by businesses because they thought this is the easiest way for us to eliminate a lot of the people. We don’t have to hire them. We don’t need to look at their resumes or whatever happens now with the algorithms online. If you don’t have a bachelor’s degree, you’re out.

ISAACSON: When I finished your book, I realized it wasn’t just about, you know, middle class having the struggle and affordability, although that was huge. It was about a bigger social change. When you say that the median age of buying a home is now 40, the highest it’s ever been. And then you look at the fact that people aren’t getting married, partly because of that, they’re not having children because of that, there’s not family formation, they don’t feel they have a secure job at a secure wage. To what extent is this more than just about economics and it just almost tearing apart the fabric of our society?

DICKERSON: One of the things that the middle class has always meant in this country – ignoring the way that I define it in terms of income – the middle class has always meant normal. It’s always meant stable. It’s always meant secure. And if you don’t have a middle class and if you are a person that is struggling to become middle class or you wake up every morning in fear that you’re gonna tumble out of the middle class, we start getting into a space of emotional and psychological and not just financial.
To imagine that we are in a country when young adults don’t think they’re ever gonna be able to move out of their parents’ home and live independently unless they have two or three other roommates, when you have young adults that aren’t dating because they don’t think they can afford to get married, and many that do get married their babies are fur babies and they’re not grand babies – for those of us that, you know, maybe thought we were gonna have grandchildren one day – that is a fundamental transformation of the American society and it’s something that our political leaders really need to be paying attention to.

ISAACSON: Mechele Dickerson, thanks for joining us.

DICKERSON: Thanks so much for having me on.